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2 (c) V.E. Eromosele Nigerian Nat Petroleum Corp Africa and World Oil In the decade to 2004, Africa contributed 27.5 per cent to the increase in world oil reserves In the decade to 2004, Africa contributed 27.5 per cent to the increase in world oil reserves Although Africa accounts for 11.4 per cent of world oil production, it recorded a 32 per cent growth in production over last decade compared with world’s average of 20 per cent Although Africa accounts for 11.4 per cent of world oil production, it recorded a 32 per cent growth in production over last decade compared with world’s average of 20 per cent Nigeria, Algeria, Libya and Angola account for 76 per cent of Africa’s oil production Nigeria, Algeria, Libya and Angola account for 76 per cent of Africa’s oil production Oil from ageing fields and new deepwater terrains pose unusual challenges and require big budgets Oil from ageing fields and new deepwater terrains pose unusual challenges and require big budgets

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3 (c) V.E. Eromosele Nigerian Nat Petroleum Corp Africa and World Gas Although Africa accounts for 7.8 per cent of world natural gas reserves, it supplies 20 per cent of world LNG Although Africa accounts for 7.8 per cent of world natural gas reserves, it supplies 20 per cent of world LNG Nigeria and Algeria by far top the gas reserves African league Nigeria and Algeria by far top the gas reserves African league The same is true of LNG supplies: Algeria is a world leader in fourth position and Nigeria is sixth The same is true of LNG supplies: Algeria is a world leader in fourth position and Nigeria is sixth With Nigeria LNG Trains 4 and 5 commencing operations since fourth quarter 2005 and exporting since first quarter, Nigeria’s position is soon to change With Nigeria LNG Trains 4 and 5 commencing operations since fourth quarter 2005 and exporting since first quarter, Nigeria’s position is soon to change Next to Qatar, Nigeria LNG is the world’s second fastest growing Next to Qatar, Nigeria LNG is the world’s second fastest growing

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4 (c) V.E. Eromosele Nigerian Nat Petroleum Corp Nigeria: Financing Energy Growth Some $11bn would be needed for seven LNG trains to be installed in Nigeria by three entities in the next six years. The entities are Bonny-Island based Nigeria LNG, Brass LNG and Olokola LNG Some $11bn would be needed for seven LNG trains to be installed in Nigeria by three entities in the next six years. The entities are Bonny-Island based Nigeria LNG, Brass LNG and Olokola LNG NNPC projects that $34bn will be invested in Nigeria’s oil-related projects in the three years to 2008 NNPC projects that $34bn will be invested in Nigeria’s oil-related projects in the three years to 2008 NNPC would through budgets and ‘carry arrangements’ fund part of this requirement. Majors would fund their share and invest in assets developed under PSCs. Where does the balance come from? NNPC would through budgets and ‘carry arrangements’ fund part of this requirement. Majors would fund their share and invest in assets developed under PSCs. Where does the balance come from? Third-party financing, with improved terms Third-party financing, with improved terms

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11 (c) V.E. Eromosele Nigerian Nat Petroleum Corp Case 3: NNPC-Mobil NGL-II (2004) Success Factors Few financing parties ensured fast-track execution of transaction and less protracted negotiations Co-lending ensured commitment of other lenders NNPC and Nigerian government support ensured that “true sale” opinion was accepted for the novel FSA structure Creativity of financial adviser and willingness to try new approach Ability to convince market that it really does not need hard asset security, resulting in a paradigm shift Sound economics of project and positive environmental impact ensured that deal was done with a structure that did not breach World Bank negative pledge

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12 (c) V.E. Eromosele Nigerian Nat Petroleum Corp Gas Attraction Gas-related projects are amenable to financing Gas is considered as an environmental- friendly, clean and efficient energy source, hence the projects do not attract undue NGO attention Decision is easier as choice is usually between wasting a valuable asset and monetising it with environmental benefit such as gas flaring reduction LNG business is characterised by long-term sale and purchase agreements (SPA) with credit worthy off-takers: this provides lenders with significant comfort in the event of default LNG market and technology are fast- maturing, resulting in “commoditisation” and international bank markets are now familiar Unlike power projects, no LNG project financing to date has recorded a significant default Gas-prices have stabilised on the high end of the scale both in the US and in Europe Several alternatives exist in financing LNG vessels

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16 (c) V.E. Eromosele Nigerian Nat Petroleum Corp Learning Lessons for future Success Simplicity: Future LNG financing, even green-fields, need not be as complex as NLNG+. Need to find easier ways to mitigate risks. Fewer agreeable parties and sympathetic lawyers help deals. Simplicity: Future LNG financing, even green-fields, need not be as complex as NLNG+. Need to find easier ways to mitigate risks. Fewer agreeable parties and sympathetic lawyers help deals. Speed: NNPC-MPN NGL-II project and lately, the NNPC-MPN Satallite Fields project suggest that deals can be started and finished within a year. Can lawyers shorten the list of Condition Precedents (CPs) for drawdown? Speed: NNPC-MPN NGL-II project and lately, the NNPC-MPN Satallite Fields project suggest that deals can be started and finished within a year. Can lawyers shorten the list of Condition Precedents (CPs) for drawdown? Soft Market: We must take advantage of an international bank market that is now keen about Nigeria and extract better terms e.g. NNPC majority holding (as was done in the Satellite Fields deal) Soft Market: We must take advantage of an international bank market that is now keen about Nigeria and extract better terms e.g. NNPC majority holding (as was done in the Satellite Fields deal) Pricing: With US’ One-year LIBOR at 5.1 per cent, we must in future deals strongly negotiate down “Nigerian risk premium,” particularly after settling Paris Club and BB _ rating Pricing: With US’ One-year LIBOR at 5.1 per cent, we must in future deals strongly negotiate down “Nigerian risk premium,” particularly after settling Paris Club and BB _ rating Tenor: For the right projects, tenors of up to 12-13 years are achievable for Nigerian risk. Tenor: For the right projects, tenors of up to 12-13 years are achievable for Nigerian risk. Charity begins at home: With 25 large Nigerian banks, better, bigger deals can be done Charity begins at home: With 25 large Nigerian banks, better, bigger deals can be done

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17 (c) V.E. Eromosele Nigerian Nat Petroleum Corp Final Thought Lenders to gas and power projects would always seek all the comfort they can get. Remember: “A bank is a place, That will lend you money if You can prove you don’t need it” -Bob Hope (1959) The burden of proof is squarely ours. May we rise to the challenge by devising better templates of success. The burden of proof is squarely ours. May we rise to the challenge by devising better templates of success.